Hedge Fund Technology: Timing is Everything

Hedge Funds and Hype Cycles

Industry buzzwords come and go. Once they reach the dizzy heights of hype and hysteria, they either disappear into obscurity or mature into bonafide technologies that become part of our day to day lexicon. For IT decision makers, timing is everything – adopt too early and you risk getting burnt, adopt too late and you fail to gain advantage.

One of the technologies that could stake its claim to longevity or vanish in a puff of smoke in the coming few years is Gamification. There are consumer apps for gamifying personal investment strategies, its use in fund recruitment is growing, and it’s easy to grasp why the likes of Scutify’s Fantasy Hedge Fund Manager could prove popular with professional investors.

In the grand scheme of things though it’s all a bit, well, early.

Cast your mind back five ago years and those new technology trends that the hedge fund industry was intrigued by – but mostly petrified of – included the likes of social, cloud and mobility. Half a decade later we’ve come through the hype, and some of the FUD, to be just ‘a little wary’ of them.

So while gamification may one day take its place in our hedge fund technology lexicon, experience tells us we’re all better off shortening the lens and maximizing the opportunity that proven IT strategies present first.

The Mobile Hype Cycle

In Gartner’s 2014 hype cycle of emerging technologies, gamification sat on the cusp of the ‘trough of disillusionment’, with the analyst house touting a 5-10 year period before maturity and significant deployment. In contrast, many enterprise mobility and cloud trends had passed disillusionment, been through the so-called ‘slope of enlightenment’ and made their way onto the ‘plateau of productivity’ by this time. In other words, early adoption happened and the technologies are yielding results.

That first-follower spot – after the early adoption and proven productivity – is where the real opportunity for the investment management industry’s IT adoption lies. With heightened risk and tighter regulation always looming, hedge funds are indeed wise to wait.

But not too long; adopting technology strategies that are proven enough to de-risk, but still new and innovative enough to differentiate makes a big impact in an increasingly competitive environment.

Since industry analysts first identified the maturity of the mobile and cloud hype, we’ve come a long way from enforced Blackberry devices and secret iPhone amnesties. However, few would argue there isn’t still a long way to go.

From Hype to Ripe

Perhaps the great irony of the new crop of fantasy hedge fund apps is that they fail to provide a real taste of being a professional investor. Not because of the data accuracy or process, but because they’re inherently social, collaborative and mobile.

A world where an investment professional is able to access real-time market data, instantly make a trade and share performance with his peers from a single mobile app remains a fantasy. With our stringent regulatory environment and strict security requirements perhaps it always will, but enabling analysts to securely access the fund’s data, undertake research, and share and collaborate on ideas when they’re out of the office really shouldn’t be.

BipsynciOSApp

So perhaps it’s time to set aside any lingering privacy fears of once new mobile IT or cloud applications and focus in on extracting the tangible business benefits of the apps and user experiences that can make mobility really count for investment professionals.

Enough time and deployment has passed to make a productive mobile workforce standard practice, and the technology that enables it mature. Any application or system you’re looking to deploy that focuses on the creation or the consumption of data, whether Research Management Software or a Portfolio Management System, has to be mobile.

Time though, nor technology, waits for no CTO. Gartner’s 2015 Hype Cycle for Emerging Technologies was a key topic at its recent ITXpo event.  If you thought gamification could be a handful, the 2015 report included the potential for Cryptocurrency Exchanges by 2017 and augmented reality as early as 2020. Securely mobilizing research data doesn’t seem quite so scary now does it?